The Quick Read: Credit tiers decide what it costs to replace a low-rate first mortgage with a conventional cash-out loan, not just whether you qualify. A cash-out refinance swaps your entire balance into a new loan, so the old rate does not survive on any part of it. Score and loan-to-value together set the price adjustment, and the wholesale floor is a 620 decision score. Whether it makes sense depends on how much cash you need and what the new loan does to the whole balance.
What Is a Conventional Cash-Out Refinance?
A conventional cash-out refinance is a new first mortgage that pays off your existing loan and puts the extra equity in your hands as cash. The Fannie Mae Selling Guide requires the new loan to pay off existing mortgages through a new first mortgage on the same property. It also requires at least one borrower to have been on title for six months.
On a one-unit principal residence, the cap is 80% loan-to-value. On two- to four-unit principal residences, it is 75%. Rate-and-term (limited cash-out) refinances reach 95% on a one-unit home because they pay off the loan and costs with only incidental cash back. That gap is why the loan purpose is fixed at the start of every file.
For a locked-in homeowner, the important point is mechanical. The new loan replaces the whole first mortgage. You give up the low rate on the full balance, not only on the cash you pull out. Lendmire’s cash-out refinance programs are built around that trade, and the credit tier is a big part of what it costs.
Key Terms Defined
Credit tier: a band of credit scores that lenders and the agencies treat alike when pricing a loan.
Decision score: the credit score the lender uses to qualify the file, usually the middle of the borrower’s scores.
LTV (loan-to-value): the new loan balance divided by the appraised value of the home.
CLTV: the combined balance of all liens on the home divided by its value.
Loan-level price adjustment (LLPA): a pricing add-on the agencies attach to a loan based on factors such as score and LTV.
Seasoning: how long you have held title or how old the loan being paid off is.
How Do Credit Tiers Work on a Cash-Out Loan?
Credit works in two layers: a floor and a price. Across the wholesale conventional programs Lendmire places files with, the floor starts at a 620 decision score, and 640 on an adjustable rate under manual underwriting. Below the floor, there is no file. Above it, the tier changes what the loan costs.
The price layer is the LLPA. Fannie Mae’s LLPA matrix sets adjustments by credit score and LTV, and the adjustments are cumulative. Each feature of the loan adds to the total. Cash-out also gets its own stand-alone price grid under Lender Letter LL-2023-01, separate from purchase and limited cash-out. A borrower comparing a rate-and-term quote to a cash-out quote is comparing two different grids.
Think of it as a grid with score down one side and LTV across the top. Moving down in score or up in LTV moves you into a costlier cell. Cost rises most where both happen together.
| Factor | What it does on a cash-out file |
|---|---|
| Decision score | Sets eligibility floor and the price tier |
| LTV band | Moves the price cell; 80% is the one-unit cap |
| Unit count | 2-4 units cap at 75% |
| DTI | Over 45% on a Fannie Mae DU file triggers six months of reserves |
| Occupancy | Principal residence required here |
Credit score alone never tells the whole story. A 760 borrower at the 80% cap and a 700 borrower at 65% can land in very different price cells. The first has more score and more leverage. The second has less of both.
Where Do the Tiers Show Up for a Locked-in Owner?
They show up in the comparison against what you already have. Picture a homeowner with a low-rate first mortgage and a strong score who wants cash for a renovation. The tier may be excellent, yet the loan still replaces a mortgage that cannot be rebuilt on today’s terms. A top tier does not fix that.
Now picture a borrower with a middling score and high leverage near the cap. Here the tier works against them twice. The price cell is costlier, and the whole balance moves into it. That is the case where a second lien on the home often deserves a close look, because it leaves the first mortgage alone.
The CFPB’s cash-out research adds a note of caution. Using home equity to pay off other debt can make sense if the cost of extracting the equity is lower than the cost of the debt. It also moves unsecured debt onto the house. And it draws down wealth you hold today.
A short decision order helps:
1. Confirm your decision score and which tier it sits in.
2. Work out the cash you need as a share of the home’s value.
3. Compare the new loan on the whole balance against keeping the first mortgage and borrowing separately.
4. Decide only after you see both in writing on a Loan Estimate.
Why Do Credit Tiers Look Different at Different LTVs?
Because the matrix prices score and leverage together. At lower LTVs, a weaker score costs less than it does near the cap. At the cap, even a good score sits in a higher-priced cell.
The wholesale network includes one lane that reaches 89.99% LTV with no mortgage insurance. It requires a 680 score and a 50% ratio on a thirty-year fixed, a primary residence and a conforming balance, with six months of its own seasoning. It is not available in Texas, where the state constitution caps a homestead cash-out at the agency figure. Most conventional cash-out files sit under the standard caps, so treat that lane as a specific tool, not the default. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Here is where it gets practical. The ratio calculation matters at the edges. Freddie Mac’s Guide section 4203.1 rounds calculated ratios up to the next whole number, so 80.01% counts as 81%. A home that appraises a hair low can push a file over the cap and into a different cell.
What Else Decides the Outcome?
Credit is one input. Several others can stop a file or change its cost.
Two seasoning clocks. One is six months on title. The other is 12 months since the note date of the loan being paid off, set out in Fannie Mae’s cash-out eligibility update. Borrowers often assume only the first one applies. Exceptions exist, including delayed financing, inheritance and legal awards, but each has its own documentation.
DTI and reserves. Automated findings govern most files, with a total ratio ceiling of 50%. On a Fannie Mae DU file, a DTI above 45% triggers six months of reserves. That means cash you must hold back after closing.
The appraisal. Value times the maximum LTV sets the ceiling on the new loan. The cash you receive is smaller than that, because payoff, closing costs, prepaids and any other liens come out first.
Listing history. If the home was listed for sale, it must be off the market by disbursement.
Property type. Manufactured housing carries materially lower cash-out limits than site-built homes, per the Fannie Mae Eligibility Matrix.
Where the General Rule Breaks
A few edge cases change the answer.
- Delayed financing. If you bought with cash within the last six months, delayed financing waives only the title wait. Cash-out pricing and every other cash-out rule still apply. The new loan is limited to your documented initial investment plus financed costs.
- Recent cash-out. A refinance is not eligible as limited cash-out if a cash-out refinance on the same property had a note date 30 days or less before the new application, under Fannie Mae’s prohibited refinancing practices.
- Student loan cash-out. The price adjustment is waived when the requirements are met, but the lender must confirm them itself.
- Title in an entity. Entity ownership has its own ownership-clock rules.
- Not a cash-out product. Programs built for low-rate relief, such as RefiNow-style options, allow only a tiny cash-out amount. They solve a different problem.
How Do You Move Up a Tier Before Applying?
Tier edges are real. A small score drop can move a borrower into a costlier cell, so the weeks before an application matter. The goal is to keep the score steady, not to chase a jump.
- Pay revolving balances down before the lender pulls credit, so utilization is lower.
- Stop opening new credit. Each new account can move a score the wrong way.
- Check your reports for errors and fix them before applying.
- Know that the lender uses a decision score, which may differ from the score on a free app.
- Keep payment history clean. Missed payments hurt more than any other single factor.
If your score sits just under a band edge, it may be worth waiting. If the cash need is urgent, compare the price at your current tier against a second-lien option before deciding.
When Does Cash-Out Still Make Sense?
It makes sense when the cash need is large and a second lien would not cover it. It also fits when the existing rate is not actually low, or when the purpose is a one-time project that raises the home’s value. The CFPB’s earlier release on cash-out borrowers found borrowers most often cited paying off other debts, with home repairs second. Their scores rose sharply after the refinance, then slipped back, though they stayed above where they began.
It makes less sense when the cash need is small compared with the balance. In that case, replacing the whole mortgage to reach a modest sum is a lot of cost for little equity. Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. Every figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
Frequently Asked Questions
What is the minimum credit score for a conventional cash-out refinance?
The wholesale conventional programs start at a 620 decision score, and 640 on an adjustable rate under manual underwriting. That is a floor, not a target. Some lenders set a higher one, and the score you hold within the LTV band drives the price.
Can I keep my low rate and still take cash out?
No. A cash-out refinance replaces the entire first mortgage, so the old rate goes away on the whole balance. If keeping the rate matters, look at borrowing against the home with a separate second lien instead.
How much equity do I need to leave in the home?
On a one-unit principal residence, the new loan is capped at 80% of value, so at least 20% stays in the home. On two- to four-unit principal residences it is 75%. The cash you receive is lower than the cap, because payoff and costs come out first.
Does a cash-out refinance hurt my credit score?
A new loan brings a credit inquiry and a new account, which can move a score in the short term. The CFPB’s findings show scores rose after cash-out refinances on average, then slipped back but stayed above pre-refinance levels. Your own result depends on your file.
How long must I own the home before a cash-out refinance?
At least one borrower must be on title for six months, and the first mortgage being paid off must be at least 12 months old, measured note date to note date. Delayed financing, inheritance and legal-award exceptions exist, each with its own documentation.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For the program’s current guidelines, see conventional loan programs.
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References
1. Fannie Mae Selling Guide B2-1.3-03, Cash-Out Refinance Transactions
2. LLPA matrix
4. CFPB, Cash-Out Refinances and Paydown Behavior of Non-Mortgage Debt Balances
5. Freddie Mac Seller/Servicer Guide Section 4203.1
6. Fannie Mae Capital Markets, Updates to Cash-Out Refinance Eligibility
7. Fannie Mae Eligibility Matrix
8. Fannie Mae’s prohibited refinancing practices
9. CFPB newsroom release on cash-out refinance borrowers and credit scores
This article is part of Lendmire’s Conventional Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: 5 Myths About Qualifying for a Conventional Cash-Out Refinance · Can a Homeowner Do a Conventional Cash-Out Refinance in Six Months? · Can a Cash Buyer Do a Conventional Cash-Out Refinance in Six Months?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.